Inflation increased to 14% in December 2021

NCPI based headline inflation (Y-o-Y) increased to 14.0 per cent in December 2021 from 11.1 per cent in November 2021 due to increases of prices of items in both Food and Non-food categories. Meanwhile, Food inflation (Y-o-Y) and Non-food inflation (Y-o-Y) recorded at 21.5 per cent and 7.6 per cent, respectively, in December 2021, according to the weekly economic indicators of the Central Bank.

The report further said: Furthermore, the NCPI measured on an annual average basis, increased to 7.0 per cent in December 2021 from 6.2 per cent in November 2021.

Sustaining the expansion on a M-o-M basis, the Purchasing Managers’ Indices for both Manufacturing and Services activities increased in December 2021, recording 58.1 and 62.4 index values, respectively.

During the period under review (15.01.2022 to 21.01.2022), crude oil prices showed a mixed performance. The crude oil prices increased to 7-year highs at the beginning of the week as investors were concerned that geopolitical tensions involving major oil producers could worsen the already tight supply outlook. However, prices declined later on data that there was a significant weekly buildup of gasoline inventories in US and on the White House’s statement that there are ‘tools continue to

remain on the table’ to address the commodity price surge. Overall, Brent prices decreased by US dollars 0.92 while WTI prices increased by US dollars 2.33 per barrel, during the period.

On 20th January 2022, the Central Bank decided to increase its Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 50 bps each, to 5.50 per cent and 6.50 per cent, respectively. The Bank Rate, which is linked to the SLFR with a margin of +300 bps, automatically adjusted to 9.50 per cent.

Weekly AWPR for the week ending 21st January 2022 increased by 7 bps to 8.65 per cent compared to the previous week.

The reserve money increased compared to the previous week mainly due to the increase in currency in circulation.

The total outstanding market liquidity was a deficit of Rs. 543.367 bn by the end of this week, compared to a deficit of Rs. 459.932 bn by the end of last week.

By 21st January 2022, the All Share Price Index (ASPI) increased by 0.25 per cent to 13,371.61 points and the S&P SL 20 Index increased by 1.10 per cent to 4,604.99 points, compared to the index values of last week.

During the period from January to October 2021, government revenue increased to Rs. 1,154.8 bn compared to Rs. 1,133.6 bn recorded in the corresponding period of 2020.

During the period from January to October 2021, overall budget deficit increased to Rs. 1,575.2 bn compared to Rs. 1,317.2 bn recorded in the corresponding period of the previous year.

During the ten months ending October 2021, total expenditure and net lending increased to Rs. 2,731.7 bn compared to Rs. 2,453.7 bn recorded in the corresponding period of 2020.

During the period from January to October 2021, domestic financing increased to Rs. 1,717.4 bn compared to Rs. 1,669.4 bn in the corresponding period of 2020. Foreign financing recorded a net repayment of Rs. 142.2 bn during the period from January to October 2021 compared to a net repayment of Rs. 352.2 bn recorded in the corresponding period of 2020.

Outstanding central government debt increased to Rs. 17,343.9 bn by end October 2021 from Rs. 15,117.2 bn as at end 2020.

Since end 2020, total outstanding domestic debt increased by 19.4 per cent to Rs. 10,827.5 bn, and the rupee value of total outstanding foreign debt increased by 6.6 per cent to Rs. 6,516.4 bn by end October 2021.

During the year up to 21st January 2022, the Sri Lankan rupee depreciated against the US dollar by 1.1 per cent. Given the cross currency exchange rate movements, the Sri Lankan rupee depreciated against the Japanese yen by 2.2 per cent, the

pound sterling by 1.8 per cent, the Euro by 1.1 per cent and the Indian rupee by 1.1 per cent during this period.